Hello and welcome back to Monarch!

Ding-dong, guess who girlies!?

It’s me! Madelyn! Taking the pilot seat for the first time with this week’s article 👩🏼‍✈️💃🏼

Bailey pulled some useful sources together, and it was my job to make them take flight.

(Let me know how you think it goes in the survey below 👀)

Now, buckle up as we dive a liiiiitle bit deeper into the vast (and sometimes vastly confusing) world of stocks.

Whenever you’re ready … let’s roll ✈️ (scroll 2 soar)

Today’s Monarch Menu:

• What’s a stock? (refresher)

• Different types of stocks

  • Market capitalization.. is wut ?

• Examples of each stock type

• Why each category matters

• Fun little quiz question

What Are Stocks?

Before we flutter into today’s main event, let's make one thing clear!

Stocks: What the heck are they?!

Think of a company as an ice cream cone and stocks as the sprinkles on top 🍦

When you buy a stock, you're buying a sprinkle, or a tiny little piece, of that company.

That sprinkle makes you a shareholder who can then benefit from the company's assets and profits.

The value of your stock goes up and down depending on how well the company does, which can fluctuate based on a TON of factors that we’ll get into another time.

Different Types of Stocks

Now that we have a basic understanding of stocks, let's take a look-see at the various types of stocks you may come across in the stock market.

Stocks By Market Capitalization

Ok wait, FIRST: What is Market Capitalization anyways?

Here’s what Investopedia taught me:

What: The total value of a company as determined by the stock market, calculated by multiplying the number of outstanding shares of the company by the current market price of a single share.

Who: This is used to categorize companies as large-cap, mid-cap, or small-cap.

Why: It serves as an indicator of the company's size, stability, and financial performance (especially when compared to other companies).

✨Market Cap example✨

Let's say Company A has 1 million outstanding shares, and each share is currently worth $50. To find the market capitalization, we’ll multiply:

1 million shares x $50/share = $50 million

This means the total value or 'market cap' of Company A is $50 million 💪🏼

Large-Cap Stocks (The Big Boys)

Large-cap stocks are HUGE companies, usually worth over $10 billion. 🤯

They're often well-known leaders in their industries and tend to be less risky and more stable than smaller companies.

Ten examples of Large-Cap companies:

1. Apple: The company that makes iPhones and Mac computers

2. Microsoft: The company behind Windows and Microsoft Office

3. Amazon: The big online store and cloud service provider

4. Alphabet (Google): The parent company of Google (look here)

5. Meta (formerly Facebook): The company that runs Facebook, Instagram, and WhatsApp

6. Johnson & Johnson: A big company making medicine and everyday products

7. Procter & Gamble: The maker of products like Pampers and Gillette

8. Coca-Cola: The company famous for Coca-Cola drinks

9. Walmart: A big retail store chain

10. Visa: The company that handles electronic payments

Mid-Cap Stocks

Mid-cap stocks are from companies worth between $2 billion and $10 billion.

They're thought to have more room for growth 📈 compared to big companies, but they can also be riskier. 😅

Two mid-cap babes:

1. Southwestern Energy Co.: Oil & Natural gas exploration 🛢️

2. Light & Wonder Inc.: Cross-platform gaming company 🕹️

Small-Cap Stocks

Small-cap stocks come from companies worth less than $2 billion.

They have the most potential for growth 🙌 but also the most risk. 👎

Investing in them can be pretty up and down, especially short-term ..

.. but if you pick well, they may bring you the biggest rewards. 🤑

Examples of small-cappers:

1. Aehr Test Systems: an up and coming Semiconductor stock 🔥

2. Dave & Buster’s: If you don’t know D&B’s … you’re either lying or you’re this guy 👀

Honey, where are my socks…I mean stocks?! 🧦

Domestic Stocks

Domestic stocks are from companies on markets based within your own country. 🗺️

They go up and down based on how well your country's economy and policies are doing.

International Stocks

International stocks are stocks based in foreign countries.

Investing in international stocks helps you to diversify your portfolio…like broadening your wine palette (something I’ve been working on…hey, cabs not that bad!🍷)

As dandy as that sounds, it also introduces additional risks, (yippie 🙄) such as currency fluctuations and geopolitical events**

**I’ve never used this, but now I will, and you should too: Geopolitical events are actions and conflicts between countries or regions that can influence how nations interact, shape political landscapes, and impact the global economy. Things like trade disputes or wars. Big stuff.

Other Common Stock Types & WTF They Are

Growth Stocks

Growth stocks come from companies expected to grow a lot in sales and profits. They often work in new or tech-driven industries. 👩‍💻 Investing in them can bring big rewards, but it's riskier.

Setting the scene with an example (hypothetical) growth stock:

A biotech startup that has begun work on a promising new cancer treatment.

Only in Phase 1 of clinical trials, this company still doesn’t know when/if the FDA will approve continued trials.

If the FDA does approve Phase 2 and beyond, investors will be 🤑🤑🤑

If not … they may lose a huge chunk of their full investment gulp.

Value Stocks

Value stocks are from companies that seem cheaper than they should be when you look at their basic financials. 🤔

They might be stable and have good business plans but aren't as pricey as they could be.

People who want safety and income like these stocks.

Example? Honda babyyyy

IPO Stocks

IPO stocks are from companies that just started trading on the stock market. (Little newborn babes)👶

It's exciting because you can invest in a new company early on, but it can be shaky and risky.

Dividend Stocks

Dividend stocks come from companies that regularly share their profits 🤗 💵 with shareholders as cash payments called dividends.

People who want a dependable income often like these stocks.

Perfect dividend example = Coca-Cola 🍾

Non-Dividend Stocks

Non-dividend stocks, as the name suggests, are stocks of companies that do not pay dividends to shareholders.

Instead, they might use profits for growing the business or other projects 🛠️

These stocks can still be good if their share prices go up.

Income Stocks

Income stocks come from companies with reliable business models that make steady money. (C’mon consistency!!)

People, especially retirees, like these stocks because they provide a regular income from investments.

Cyclical Stocks

Cyclical stocks are from companies that fluctuate with the economy.

They do well when the economy is strong and people are spending a lot 🛍️

Examples include companies in manufacturing, travel, ✈️ and luxury goods 💎

Non-Cyclical Stocks

Non-cyclical stocks, often called defensive stocks, come from companies that aren't as influenced by the economy's ups and downs 🤙

They sell things people always need, like healthcare, 💊 basic goods, 🧻 and utilities 🛀

Safe Stocks

Safe stocks, 🔐 also called “low-volatility” stocks, don't change in price as much as the overall stock market.

They come from industries that don't swing much with the economy, adding stability to a portfolio.

Great safe stock examples: Apple, Starbucks, and Disney

ESG Stocks

ESG stocks, short for Environmental, 🌳 Social, 💬 and Governance stocks, are from companies that care about sustainability, social responsibility, and good governance. (That’s sexy!)

Investing in them lets you put your money into companies that do good for society and the environment, aligning with your values. 😇

Blue Chip Stocks

Blue chip stocks come from big, well-known companies that have a history of doing well.

They're leaders in their industries, known for being stable and financially strong (like Apple and Coca-Cola)

Penny Stocks

Penny stocks are from small companies 🌱 with low market value and often cost less than $1 per share. Investing in them is very risky because these companies might not be easily traded, and they may not meet the standards to be listed on major stock exchanges (ex: The New York Stock Exchange.)

These stocks are typically traded on smaller or less-regulated exchanges or over-the-counter (OTC) markets. (OTC) markets are markets that aren’t being sold on a physical floor like the New York Stock Market. They are sold directly from seller to buyer.

A few penny stock markets:

• OTCQX and OTCQB Markets: These are regulated parts of the OTC market. Companies here must meet specific financial and reporting standards. Smaller companies often use them to access capital markets.

• 🎀Pink 💗 Sheets: This is the less regulated part of the OTC market. Companies here might not have strict reporting rules. It's often linked to riskier and less-established companies.

Stocks by Sector

Stocks are often grouped by the industry or sector a company is in.

Some common sectors include communication, consumer goods, energy, finance, healthcare, industry, materials, real estate, tech, and utilities.

Investing in different sectors is a great way to spread risk in a portfolio 👍

Conclusion

Understanding the different types of stock market investments is important for building a balanced and diversified portfolio ⚖️

Important to remember: Each type of stock has its own traits and potential returns, regardless of its categorization … BUT understanding the stock type will help you diversify! 🏳️‍🌈

Also: conduct thorough research 📝 and seek professional advice before making any investment decisions.

Happy investing! 🎉

Madelyn

Sources:

1. Nerd Wallet: Types of investments

2. Smart Asset: Types of investments

3. Motley Fool: Different types of stocks

4. Investopedia: Top mid-cap stocks Q2 2023

5. Investopedia: Market capitalization

6. Investopedia: Growth stocks - example of a growth stock

7. Motley Fool: Types of stocks - safe investing stocks